In 2013, Uruguay took the unprecedented step of legalizing the production and use of marijuana. Yet, two years on, a commercial market is still in the project stage: not a single gram of cannabis has been cultivated for sale in pharmacies. The process is mired in complex regulatory details. It seems that legalizing marijuana is more complicated than anyone had predicted.
The debate over regulating cannabis in the Americas is moving fast. Chile, Colombia and Jamaica have taken concrete legal steps toward regulation. Regulating a new industry like cannabis is incredibly complex. Many drug policy advocates debate the merits of legalization or prohibition, yet rarely discuss the details of how such policies might work. This can be seen recently in Uruguay, where the discussion is mired in detail.
In December 2013 Uruguay became the first country in the modern era to legalize the production and use of cannabis. After drug policy reformers and human rights activists applauded the historic move, regulators were tasked with the complex work of drafting regulations, receiving and vetting applications, and establishing the technical framework to monitor the market. Uruguay’s cannabis law allows individuals to access the drug in three ways: grow at home, belong to a club, or buy it in licensed pharmacies. A year and nine months since the president signed the law about 3,000 people have registered to grow at home and approximately seven clubs have been licensed. Yet, not a single gram of cannabis has been cultivated for sale in pharmacies.
Many have bemoaned the slow rollout, especially when it comes to pharmacy sales. Immediately after the law’s passage, many wondered when cannabis would be sold in pharmacies. In May 2014 regulators set a six month deadline for pharmacy sales. As November came, regulators backed off setting a firm date because of general elections. Just this past August, the government said it would announce licensees this September.
September is nearly over and here we are, without any names or details. Why is it taking so long to sell retail cannabis? The answer has to do with the complexity of regulatory design. Unlike grow at home and cannabis clubs, crafting smart regulations for pharmacy sales is complex, requiring the monitoring of various actors: producers, processors, distributors and even users. Remember, it took an average of 16 months for stores to open in Colorado and Washington, and both these jurisdictions had existing medical cannabis markets -- something Uruguay did not have.
According to the latest news, the regulatory authority, IRCCA, might name the approved producers in the coming weeks with the anticipation of cannabis being sold in pharmacies in early 2016.
SEE ALSO: Coverage of Uruguay Legalization
Apart from this time frame, the bulletin mentions other challenges of cannabis regulation. These point to a lack of staff and funds. The staffing issue is related to lack of funds, but it impedes the application process. Initially, regulators need to conduct site visits, background checks, review business plans, interview applicants and more. Afterward, staff will need to monitor licensee behavior via inspections and investigations, examine receipts and inventory logs and fine noncompliant actors.
Regulating an entirely new industry requires that upfront costs be borne by the government. Whether they like it or not, Uruguayan taxpayers have been footing the bill as IRCCA operates without revenue. Though expensive at first, it is better to invest in the fixed costs of a strong regulatory agency before the market matures. Once mature, fees and taxes should cover the costs of regulations, such as monitoring licensed producers, pharmacies and clubs, product testing and prevention campaigns.
Many drug policy advocates debate the merits of legalization or prohibition, yet rarely discuss the details of how such policies might work.
IRCCA plans to have a $500,000 operating budget for the coming year. This is more than its estimated take in fees for 2016: just under $140,000. The fact that regulating cannabis will cost the government shouldn’t be a worry for the first few years. IRCCA estimates that fees will generate $1.3 million between 2017 and 2019. However, regulators need to elaborate on the free structure of licenses and tax burden of products sold in the pharmacies. Taxes are not detailed in regulation and the figures put out by IRCCA are open to interpretation. Details will better inform the public and policymakers keen on keeping costs low; regulating cannabis should not be a drain on public coffers.
Others, such as Chile, Colombia and Jamaica, need to appreciate these costs and the time it takes to regulate something as complex as the cannabis market. Designing clear and enforceable rules, vetting firms, and monitoring the behavior of firms all takes resources and time. After nearly a century of prohibition, what’s wrong with waiting a few more years to get it right?